1944 - Monetary policy subordinated
Compared with the First World War, the economic policy conducted in the Second World War was successful. The Government's policy was focused on keeping interest rates down. The Riksbank’s independence was curtailed.
The relatively successful regulation-focused economic policy conducted during the Second World War inspired the economist Gunnar Myrdal’s paper “Höga skatter – låga räntor” (High taxes – low interest rates).
He argued that interest rates were a blunter means of control for investments than taxes. Consequently, taxation should be used for investment control and, in this way, economic developments could be steered. The social democratic Government’s post-war policies were focused on economic policy, full employment and keeping interest rates down. This led to a gradual increase in regulation of the domestic capital market.
The Riksbank and its Governor Ivar Rooth opposed the low interest rate policy and tendered his resignation in 1948.
The Government’s low interest rate policy meant that the most important monetary policy tool was denied the Riksbank, which instead became subordinate to economic policy. The Riksbank’s independence was thereby curtailed.